On 12 May, the Australian government released its new Budget for the 2015/16 financial year.
Small businesses have been widely considered one of the biggest beneficiaries of this new economic plan and, with a range of new tax support, it could help growth for many.
“The new Budget is designed to allow small businesses to grow, employ more and invest more by cutting red tape,” the government explained. But how will it do this?
We take a look at what the Budget means for Australian SMEs and see what other experts have to say.
Small business tax cuts
Those businesses on the smaller side will see an improvement in their tax situations. However, many medium-sized companies may find themselves ineligible for the more generous concessions.
“Small means small,” explained David Watkins, partner for tax insights and policy at Deloitte, “(those with a) turnover of less than $2 million. Two key aspects were a reduction in the tax rate to 28.5 per cent and an immediate tax write-off for purchases of … equipment up to $20,000.”
In short, a company that sits below this $2 million turnover threshold can get an immediate tax break on purchases of $20,000 or less. This could be office equipment, vehicles or practically anything else, as Treasurer Joe Hockey explained.
“If you run a cafe, it might be new kitchen equipment, or new tables and chairs. If you’re a tradie, it might be new tools or a computer for the home office,” he said in his Budget announcement, according to the ABC.
“Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight.”
Businesses have from now until June 30 2017 to make purchases and receive their money back immediately, rather than the previous system that required those tax deduction claims to be spread over several years.
Red tape cuts
We’ve written recently about how red tape can restrict a business’s freedom to grow. The Federal Budget aims to do this within the fringe benefits tax (FBT) system, by ensuring that all work-related portable electronic devices are FBT-free. This, the government says, will “help small business employees stay connected in the digital economy”.
SMEs will also benefit from rollover relief of capital gains tax when changing their legal structures and keeping the same owners.
There is an expected boost to the concurrent issue of employment management, with contractors, full-time workers and businesses alike benefiting from the $5.5-billion Jobs and Small Business Package.
The Australian Chamber of Commerce and Industry (ACCI) explained that these measures are designed to make it easier for the more than 750,000 unemployed Australians to find work.
“The Budget will perform a pincer movement on productivity, encouraging more people to enter the labour market while also making it easier for small businesses to hire,” ACCI said.
So, the overall reception is rather positive. Now it will be up to businesses, particularly smaller ones, to ensure they have all the support they need to capitalise on such growth opportunities.